MKM: Buy Homebuilders, REITs ETFs; GRT & DDR Making Moves

By Murray Coleman

Analysts at MKM Partners are advising clients this morning that the time’s now right to buy into homebuilders and real estate.

The ETFs they’re suggesting with the most momentum appear to be the First Trust S&P REIT ETF (FRI) and the SPDR Homebuilders ETF (XHB).

About FRI, the report noted:

“Cash trading volume and shares outstanding increased for FRI last week as it broke out to a new recovery high. The breakout appears ‘real’ to us, and we recommend adding exposure to the REIT sector on a pullback, which serves to benefit from improving relative strength in the broader financial sector.”

Two of their favorite individual picks in the category are breaking to new recovery highs on Monday. One of those is Developers Diversified Realty(DDR). It’s up nearly 1% today. Meanwhile, Glimcher Realty (GRT) is ahead by 2.5%.

Concerning XHB, the analysts wrote:

“With many homebuilders on the docket to report earnings in the next two weeks, MKM Partners … is constructive on the group and … (its three-month momentum is) the second steepest of all ETFs.”

Two of MKM Partners’ real estate analyst Megan McGrath’s top picks are Pulte (PHM) and D.R. Horton (DHI). Both are trading flat to slightly negative today; they’re each also scheduled to report quarterly earnings Thursday before markets open.

The first of the majors set to report will be Ryland (RYL). It’s scheduled to release earnings Wednesday after markets close.

“We favor Pulte and D.R. Horton because we think they’ll be closest to profitability,” McGrath said in an interview. “For a builder, making money is still relatively rare.”

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JULY 26, 2011 11:43 A.M.

John Walker wrote:

You guys must be sitting on a pile of Homebuilder stocks....I always wonder when I see the Homebuilders generally have 90% plus institutional ownership, who these folks are who have ridden these stocks down for the last few years....It's YOU!!!! I have been shorting these stocks for years, so I am taking your money!

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